Celanese Corporation Reports Third Quarter 2012 Results

Celanese Corporation Reports Third Quarter 2012 Results

DALLAS--(BUSINESS WIRE)-- Celanese Corporation (NYS: CE) , a global technology and specialty materials company, today reported third quarter 2012 adjusted earnings per share of $0.93. This compares with $1.27 in the prior year period. Increased volumes and expanded operating margins in the company's portfolio of businesses focused on customer-oriented solutions, which includes Advanced Engineered Materials, and Consumer and Industrial Specialties, were offset by lower margins in Acetyl Intermediates due to continued soft demand and lower pricing across acetyl products and derivatives. Diluted earnings per share from continuing operations for the quarter were $0.74 compared with $1.05 last year.

¹ Non-U.S. GAAP measure. See reconciliation in Table 1A.

² Non-U.S. GAAP measure. See reconciliation in Table 6.

"Celanese delivered on its commitments with a solid quarter amid a challenging economic environment. Our customer-oriented solution businesses generated strong results, reflecting the value we provide to our customers, but demand for acetyl products and derivatives remained at trough-like conditions. The Advanced Engineered Materials and Consumer Specialties businesses each expanded operating EBITDA margins sequentially and year-over-year, excluding affiliate earnings," said Mark Rohr, chairman and chief executive officer. "Celanese's strong operating cash flow in the third quarter enabled the company to improve its net debt position by $124 million from the prior quarter. We will continue to pursue our balanced capital deployment strategy to optimize value for our shareholders."

Operating profit for the quarter was $163 million compared with $196 million in the prior year on expanded operating margins in the company's customer-oriented solution businesses which were offset by lower margins in Acetyl Intermediates. The tax rate and diluted share count for adjusted earnings per share in the third quarter were 17 percent and 160.1 million, respectively. Net earnings were $117 million in the third quarter of 2012 compared with the prior year results of $167 million.

Net sales in the third quarter were $1,609 million compared to $1,807 million in the prior year. The company's portfolio of customer-oriented solution businesses delivered increased year-over-year volumes, but the lower sales in the quarter were primarily driven by lower pricing in its Acetyl Intermediates and Industrial Specialties businesses, as well as unfavorable currency impacts across the company.

Recent Highlights

• Started up the company's technology development unit for ethanol production at its facility in Clear Lake, Texas. The unit will support the company's continuing development of TCX^® ethanol process technology for customers in both industrial-grade and fuel ethanol.

• Announced the company's new CelFX^TM matrix technology for filter media. CelFX^TM provides a flexible additive platform for innovation that allows our customers increased filter design flexibility, improved constituent reduction and supports a broad choice for enhancement additives.

• Increased the company's share repurchase authorization to $400 million. As of September 30, 2012, the company had $136 million remaining under its previous authorization.

Third Quarter Business Segment Overview

Advanced Engineered Materials

Advanced Engineered Materials delivered sustained results despite the impact of weaker economic conditions in Europe. Net sales were $322 million compared with $332 million in the prior year period. Pricing was up by 3 percent, reflecting the value of its innovative, customer-oriented solutions. Net sales, however, were negatively impacted by unfavorable currency. Stronger volumes in the Americas and Asia were more than offset by softer European demand across the majority of its product lines. Operating EBITDA was $109 million compared with $112 million in the prior year period as the higher pricing was offset by lower equity earnings and currency impacts. Equity earnings from the company's affiliates were $45 million compared with $52 million in the prior year period, driven by lower methyl tertiary-butyl ether (MTBE) pricing in the company's Ibn Sina affiliate. Operating profit in the third quarter of 2012 was $43 million compared with $14 million in the same period last year, primarily due to other charges and other adjustments in the third quarter of 2011 related to the company's startup and expansion of its polyacetal (POM) facility in Frankfurt Hoechst Industrial Park, Germany.

Consumer Specialties

Consumer Specialties delivered improved year-over-year performance reflecting the value-added applications it provides to its global customer base. Net sales increased to $314 million compared with $298 million in the same period last year, primarily driven by 6 percent higher year-over-year pricing on continued strong global demand. Operating EBITDA was $87 million compared with $78 million in the same period last year as operating EBITDA margins expanded on the higher pricing. Operating profit in the quarter increased to $70 million from $66 million last year.

Industrial Specialties

Industrial Specialties' net sales in the third quarter of 2012 were $297 million compared with $332 million in the prior year period. Volumes increased by 2 percent year-over-year, primarily due to increased demand in North America and Asia, partially offset by lower European volumes. However, pricing in the quarter was lower than the prior year period due to weaker demand in its Ethylene Vinyl Acetate (EVA) applications and lower raw material costs. Third quarter results were also negatively impacted by the Euro. Operating EBITDA was $36 million compared with $43 million in the prior year period as record results in Emulsions this quarter were more than offset by lower demand for EVA applications. Operating profit in the third quarter of 2012 was $23 million compared with $30 million in the prior year period.

Acetyl Intermediates

Acetyl Intermediates' net sales in the third quarter of 2012 were $785 million compared with $975 million in the same period last year, primarily due to lower pricing and demand across the acetyl chain, as well as negative currency impacts. The lower pricing in the period reflects continued weak economic conditions in Europe and Asia which contributed to softer global demand for acetyl products. Additionally, temporarily elevated industry utilization in the third quarter of 2011 due to planned and unplanned outages of acetyl producers resulted in higher industry pricing in the prior year period. Operating EBITDA in the third quarter of 2012 was $91 million compared with $168 million in the same period last year, primarily due to the lower pricing which was partially offset by lower raw material costs. Operating profit in the current period was $62 million compared with $128 million in the same period last year.

Taxes

The tax rate for adjusted earnings per share was 17 percent in the third quarter of 2012 and the third quarter of 2011. The effective tax rate for continuing operations for the third quarter of 2012 was 31 percent compared with 17 percent in the same period last year. The higher effective tax rate in the third quarter of 2012 was primarily due to changes in uncertain tax positions. Net cash taxes paid were $54 million in the first nine months of 2012 which were comparable with $48 million in the first nine months of 2011.

Strategic Investments

Earnings from equity investments, which are reflected in the company's earnings and operating EBITDA, were $50 million in the third quarter of 2012, a $7 million decrease from the prior year period primarily due to lower MTBE pricing in the company's Ibn Sina affiliate. The cash flow impact of equity investments was $37 million, a $10 million decrease from the prior year period, also related to the company's Ibn Sina affiliate.

Cash Flow

During the first nine months of 2012, the company generated $661 million in cash from operating activities, an $180 million increase from the same period last year, primarily driven by lower trade working capital versus the prior year period. Cash used in investing activities during the first nine months of 2012 was $397 million compared with $296 million in the same period last year. The 2012 results include the company's acquisition of two product lines from Ashland Inc. and investments in other productive assets. In 2011, we received the final payment of $158 million associated with the relocation of our POM operations in Germany, partially offset by lower related capital expenditures in the current period. Net cash used in financing activities during the first nine months of 2012 was $21 million compared with $224 million in the prior year period. During the second quarter of 2011, the company used a net of $116 million to prepay a portion of one of its term loan facilities. Net debt at the end of the third quarter of 2012 was $2,052 million, a $283 million decrease from the end of 2011.

Outlook

"We expect the challenging global economic environment will continue into 2013. Despite this and normal seasonality, we expect fourth quarter 2012 adjusted earnings will be modestly higher than the prior year, reflecting the progress we are making on actions that are within our control. For 2013, we expect earnings growth will be driven by Celanese-specific initiatives and be consistent with our long-term growth objectives of 12 to 14 percent," said Rohr. "We will continue to focus on technology platforms that expand the company's addressable opportunities and invest in technology innovation that enhances our growth prospects."

The company's earnings presentation and prepared remarks related to the third quarter results will be posted on its website at www.celanese.com in the investor section after market close on October 22.

Celanese Corporation is a global technology leader in the production of specialty materials and chemical products that are used in most major industries and consumer applications. Our products, essential to everyday living, are manufactured in North America, Europe and Asia. Known for operational excellence, sustainability and premier safety performance, Celanese delivers value to customers around the globe with best-in-class technologies. Based in Dallas, Texas, the company employs approximately 7,600 employees worldwide and had 2011 net sales of $6.8 billion, with approximately 73% generated outside of North America. For more information about Celanese Corporation and its global product offerings, visitwww.celanese.comor the company's blog atwww.celaneseblog.com.

Forward-Looking Statements

This release may contain "forward-looking statements," which include information concerning the company's plans, objectives, goals, strategies, future revenues or performance, capital expenditures, financing needs and other information that is not historical information. When used in this release, the words "outlook," "forecast," "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "may," "can," "could," "might," "will" and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon current expectations and beliefs and various assumptions. There can be no assurance that the company will realize these expectations or that these beliefs will prove correct.

There are a number of risks and uncertainties that could cause actual results to differ materially from the results expressed or implied in the forward-looking statements contained in this release. These risks and uncertainties include, among other things: changes in general economic, business, political and regulatory conditions in the countries or regions in which we operate; the length and depth of product and industry business cycles, particularly in the automotive, electrical, electronics and construction industries; changes in the price and availability of raw materials, particularly changes in the demand for, supply of, and market prices of ethylene, methanol, natural gas, wood pulp and fuel oil and the prices for electricity and other energy sources; the ability to pass increases in raw material prices on to customers or otherwise improve margins through price increases; the ability to maintain plant utilization rates and to implement planned capacity additions and expansions; the ability to improve productivity by implementing technological improvements to existing plants; increased price competition and theintroduction of competing products by other companies; market acceptance of our technology; the ability to obtain governmental approvals and to construct facilities on terms and schedules acceptable to the company; changes in the degree of intellectual property and other legal protection afforded to our products or technology, or the theft of such intellectual property; compliance and other costs and potential disruption or interruption of production or operations due to accidents, cyber security incidents, terrorism or political unrest or other unforeseen events or delays in construction or operation of facilities, including as a result of geopolitical conditions, including the occurrence of acts of war or terrorist incidents or as a result of weather or natural disasters; potential liability for remedial actions and increased costs under existing or future environmental regulations, including those relating to climate change; potential liability resulting from pending or future litigation, or from changes in the laws, regulations or policies of governments or other governmental activities in the countries in which we operate; changes in currency exchange rates and interest rates; our level of indebtedness, which could diminish our ability to raise additional capital to fund operations or limit our ability to react to changes in the economy or the chemicals industry; and various other factors discussed from time to time in the company's filings with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which it is made, and the company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

Reconciliation of Non-U.S. GAAP Measures to U.S. GAAP

This release reflects the following performance measures: operating EBITDA, business operating EBITDA, affiliate EBITDA and proportional affiliate EBITDA, adjusted earnings per share and net debt as non-U.S. GAAP measures. These measurements are not recognized in accordance with U.S. GAAP and should not be viewed as an alternative to U.S. GAAP measures of performance. The most directly comparable financial measure presented in accordance with U.S. GAAP in our consolidated financial statements for operating EBITDA and business operating EBITDA is net income; for proportional affiliate EBITDA is equity in net earnings of affiliates; for affiliate EBITDA is operating profit; for adjusted earnings per share is earnings per common share-diluted; and for net debt is total debt.

Use of Non-U.S. GAAP Financial Information

• Operating EBITDA is defined by the company as net earnings less interest income plus loss (earnings) from discontinued operations, interest expense, taxes, and depreciation and amortization, and further adjusted for Other Charges and Adjustments as described in Table 7. We present operating EBITDA because we consider it an important supplemental measure of our operations and financial performance. We believe that operating EBITDA is more reflective of our operations as it provides transparency to investors and enhances period-to-period comparability of our operations and financial performance. Operating EBITDA is one of the measures management uses for its planning and budgeting process to monitor and evaluate financial and operating results and for the company's incentive compensation plan. Operating EBITDA should not be considered as an alternative to net income determined in accordance with U.S. GAAP. We may provide guidance on operating EBITDA and are unable to reconcile forecasted operating EBITDA to a U.S. GAAP financial measure because a forecast of Other Charges and Adjustments is not practical.

• Business operating EBITDA is defined by the company as net earnings less interest income plus loss (earnings) from discontinued operations, interest expense, taxes and depreciation and amortization, and further adjusted for Other Charges and Adjustments as described in Table 7, less equity in net earnings of affiliates, dividend income from cost investments and other (income) expense. This supplemental performance measure reflects the operating results of the company's operations without regard to the financial impact of its equity and cost investments.

• Affiliate EBITDA is defined by the company as operating profit plus the depreciation and amortization of its equity affiliates. Proportional affiliate EBITDA, a measure used by management to measure performance of its equity investments, is defined by the company as the proportional operating profit plus the proportional depreciation and amortization of its equity investments. The company has determined that it does not have sufficient ownership for operating control of these investments to consider their results on a consolidated basis. The company believes that investors should consider proportional affiliate EBITDA as an additional measure of operating results.

• Adjusted earnings per share is a measure used by management to measure performance. It is defined by the company as net earnings (loss) available to common shareholders plus preferred dividends, adjusted for other charges and adjustments, and divided by the number of basic common shares, diluted preferred shares, and options valued using the treasury method. We may provide guidance on an adjusted earnings per share basis and are unable to reconcile forecasted adjusted earnings per share to a U.S. GAAP financial measure without unreasonable effort because a forecast of Other Items is not practical. We believe that the presentation of this non-U.S. GAAP measure provides useful information to management and investors regarding various financial and business trends relating to our financial condition and results of operations, and that when U.S. GAAP information is viewed in conjunction with non-U.S. GAAP information, investors are provided with a more meaningful understanding of our ongoing operating performance. Note: The income tax rate used for adjusted earnings per share approximates the midpoint in a range of forecasted tax rates for the year. This range may include certain partial or full-year forecasted tax opportunities, where applicable, and specifically excludes changes in uncertain tax positions, discrete items and other material items adjusted out of our U.S. GAAP earnings for adjusted earnings per share purposes, and changes in management's assessments regarding the ability to realize deferred tax assets. We analyze this rate quarterly and adjust if there is a material change in the range of forecasted tax rates; an updated forecast would not necessarily result in a change to our tax rate used for adjusted earnings per share. The adjusted tax rate is an estimate and may differ from the tax rate used for U.S. GAAP reporting in any given reporting period. It is not practical to reconcile our prospective adjusted tax rate to the actual U.S. GAAP tax rate in any given future period.

• Net debt is defined by the company as total debt less cash and cash equivalents. We believe that the presentation of this non-U.S. GAAP measure provides useful information to management and investors regarding changes to the company's capital structure. Our management and credit analysts use net debt to evaluate the company's capital structure and assess credit quality. Proportional net debt is defined as our proportionate share of our affiliates' net debt.

Results Unaudited

The results presented in this release, together with the adjustments made to present the results on a comparable basis, have not been audited and are based on internal financial data furnished to management. Quarterly results should not be taken as an indication of the results of operations to be reported for any subsequent period or for the full fiscal year.